Agriculture Secretary Tom Vilsack announced the official startup of the Farm Bill’s new Dairy Title, the Dairy Producer Margin Protection Program (MPP), in a media conference call this morning. He and one of the Bill’s champions, Vermont Senator Patrick Leahy, emphasized how the program was designed to help “small to medium size dairy operations” by protecting dairy margins as opposed to previous programs designed more to protect prices.
Signup will run September 2, 2014 to November 28, 2014 for the last four months of 2014 and all of calendar year 2015. Future signups will run July 1-September 30 and the next available signup will not be until the summer of 2015. Details are available from local Farm Service Administrative offices and State University Extensions. Vilsack also pointed to an online program at USDA Farm Bill or USDA MPP tool.
A National Milk press release adds there is a $100 sign-up fee for each calendar year, which qualifies a farmer to receive free, basic margin insurance coverage. Once farmers pay that fee, they are enrolled in the MPP for its duration, through 2017, and must annually pay at least the $100 fee.
The MPP allows farmers to protect the margin between milk prices and feed costs. Producers will insure their margins on a sliding scale, and must decide annually both how much of their milk production to cover (from 25% up to 90%), and the level of margin they wish to protect.
Basic coverage, at a margin of $4 per hundredweight, is offered at no cost. Above the $4 margin level, coverage is available in 50-cent increments; up to $8 per cwt. Premiums are fixed for five years, but will be discounted by 25% in 2014 and 2015, for annual farm production volumes up to 4 million pounds. Premium rates are higher at production levels above 4 million pounds.
“Importantly,” says NMPF, “USDA agreed with NMPF that the lower premiums will apply to the first 4 million pounds of a farm’s enrolled annual milk production, regardless of the farm’s total production. For example, a farm with an annual production history of 8 million pounds that elects to cover 50% of its production history would pay the lower rate on all 4 million pounds enrolled in the program. Farmers will be able to change their coverage (the percentage of milk insured, as well as margin level) on an annual basis, with USDA establishing a 90-day enrollment window of July 1-Sept. 30 each year after 2014.”
The MPP’s margin definition is the national all-milk price, minus national average feed costs, computed by a formula NMPF developed using the prices of corn, soybean meal, and alfalfa hay. Farms in the program will be assigned a production history consisting of their highest milk production in either 2011, 2012 or 2013. A farm’s production history will increase each year after the farm first signs up based on the average growth in national milk production. Any production expansion on an individual farm above the national average cannot be insured.
When the margins announced by USDA for the consecutive two-month periods of Jan.-Feb., Mar.-Apr., May-June, etc., fall below the margin protection level selected by the producer (from $8/cwt. down to $4), the program will pay farmers the difference on one-sixth (or two months’ worth) of their production history at the percentage of coverage they elected to insure. Premiums must be paid either in full at sign-up, or 25% by February 1, with the remaining 75% balance to be paid by June 1. NMPF had urged USDA to provide greater flexibility on producer premium payment, such as through milk check deductions.
NMPF President and CEO Jim Mulhern said; “While USDA advised us they did not have time to set up such a system for the initial launch of MPP, we will continue to work with the department in an effort to modify this feature for future years. The new Margin Protection Program is more flexible, comprehensive and equitable than any safety net program dairy farmers have had in the past,” Mulhern said. “It is risk management for the 21st century, and we strongly encourage farmers to invest in using it going forward.”
A second part of the MPP is a dairy product donation program that is triggered when margins collapse. The program purchases dairy products to give to food banks and, unlike the previous Dairy Price Support Program, does not store dairy products but purchases them to give away. The program also provides export and marketing incentives.
NMPF President and CEO Jim Mulhern stated in his teleconference that this bill represents “four years of consensus building” and that he is “pleased with the result,” but added “there’s still more work ahead.” He said the biggest focus now is outreach to farmers to help them understand and use this new program and NMPF will develop a variety of tools to that end.